Final answer:
Mary paid 3 points to reduce her mortgage interest rate, which equates to $6,000 (3% of the $200,000 loan), and she can deduct this full amount in the year it was paid, 2015.The correct answer is D. $6,000.
Step-by-step explanation:
On March 31, 2015, Mary borrowed $200,000 to refinance the original mortgage on her principal residence and paid 3 points (where each point is 1% of her loan amount) to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period.
The question asks, "How much can Mary deduct in 2015 for her points paid?"
The calculation of the points Mary paid is as follows: 3 points on a $200,000 loan is equal to 3% of $200,000. So, Mary paid 3 x $200,000 x 0.01 = $6,000 in points.
In accordance with IRS rules, points that are paid for the purchase of a principal residence are generally fully deductible in the year they are paid. Therefore, Mary can deduct the full amount of the points paid in 2015.